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4 Questions Teachers Should Ask a Financial Advisor

Both public and private school teachers have special financial considerations that a high-quality financial advisor should address and incorporate into a financial plan for their clients. But is this happening?

Below are 4 questions that teachers should ask when they are choosing a financial advisor.

1. Are you a fiduciary? What are your certifications?

Your very first question should determine whether the financial advisor you are considering has a fiduciary responsibility to you. Simply put, fiduciaries must place your interests above their own, rather than providing recommendations that will make the “advisor” the most money. Fiduciaries must disclose any conflicts of interest and make a good faith effort to provide all relevant information to aid you in making your financial decisions.

Believe it or not, not everyone who calls themselves a financial advisor follows a fiduciary standard. Consider working with a financial advisor who is in fact a fiduciary.

Financial advisors with fiduciary obligations are held to a higher standard than the financial professionals who are required to meet only the “suitability” standard, which only obligates them to provide “suitable” recommendations that match the client’s general needs and risk profile, rather than acting in the client’s best interest.

Some insurance agents, broker-dealers and personal bankers must only meet the suitability standard. A financial advisor with an advisory relationship with you can help you determine your insurance and investment needs, and as a fiduciary, is obligated to act solely on your best interest.

You should also find out the certifications of the financial advisor with whom you are considering working.

2. What financial planning services do you provide?

Many financial advisors provide a range of financial services beyond investment management, including retirement and estate planning, tax and insurance advice, and budgeting and cash flow recommendations.

You should also ask whether the financial advisor you are considering has advised teachers before. In particular, retirement planning is a particularly salient issue for teachers, who are unique in being one of few careers that still pays pensions to retirees after they have completed a certain number of years of service and reached retirement age. Financial advisors who specialize in working with teachers and school district personnel can personalize your overall financial plan in the context of a teacher’s financial needs, life goals and income and spending projections.

In New York, most public school teachers are part of either the New York State Teachers Retirement System or the New York City Teachers Retirement System, meaning teachers contribute a small percentage of their salary to the pension plan in return for receiving a guaranteed monthly income upon reaching retirement age.

Financial advisors can also advise teachers on their 403(b) retirement account investment options and contribution rates, as well as provide guidance on how much, if any, the client should also consider contributing to a traditional or Roth IRA.

Experienced advisors will also be able to advise teachers on other financial considerations, including potential tax deductions for student loan interest, national and state loan forgiveness programs and deductions for unreimbursed classroom expenses.

3. What are your fees and expenses?

Financial advisory firms differ in how they charge clients, but a good financial advisor will not make this process difficult to understand and will readily answer any questions you have about management and advising fees.

In many instances, you will pay either a fixed fee as a dollar amount or as a percentage of your assets invested with the firm. Some firms might charge a retainer fee for ongoing access to a financial advisor in addition to charging clients for portfolio management.

Be sure you understand what you will be charged and how often.

For every financial planning firm that you consider, you should understand which services you will be able to access. There may be a tiered system for services, such that you will have more access to guidance or contact with your financial advisor if you pay for a higher tier service. These more extensive services may be more extensive than you need, or they may be useful to you, especially if you would prefer regular feedback on your financial plan.

For example, will you just receive investment advice or portfolio management, or will your fees cover other financial services? Advisors differ on the services they offer, but these other domains could include estate plan suggestions, retirement projections and insurance needs assessments.

One of the advantages of working with a financial advisor who has a fiduciary duty to advisory clients is that they often provide competitive and negotiable fees for services for you when they are recommending an investment. In a brokerage relationship, clients typically pay a commission on each transaction in the account.

You can use a pre-written outline that I’ve created on my website to get this conversation started. That resource can be found here.

4. What is your investment and financial planning philosophy?

Finally, the best financial advisors are aware of the limitations of planning – namely, that the future is impossible to predict, and no plan can be perfect. However, different advisors have different philosophies on how they approach the overall process of preparing financially for the future.

Clients should also consider their own investment philosophy and the degree of risk they are willing to incur as they explore potential financial advisors.

The client’s own investing preferences should match the approach used by the financial advisor he or she decides to work with.

Conclusion

Approaching a prospective financial advisor or financial-advisory firm might seem intimidating, but reputable advisors should be happy to answer your questions about their process and the services they provide.

In an industry based heavily on the strength of a financial advisor’s reputation for providing high-quality services, it is in the advisor’s best interest to understand your needs, and both the client and the advisor should communicate their expectations clearly to ensure that they will be a good fit for each other for years to come.

Warwick Valley Financial Advisors is a comprehensive financial-services firm that specializes in wealth management for teachers, school district executives and their families. Contact us directly to see how we can help you.

financial review

The Annual Financial Check-Up

Don’t ignore it. Here’s why.

Here’s the scenario … you get a card in the mail, one of those little reminders that tells you it’s time for your annual financial checkup. Your reaction: I’ll take care of that later. Here’s why you should look forward to it.

Why do I need an annual financial checkup also known as an annual review?

Because things change, and during the course of the last 12 months, you may have … changed jobs, made major purchases, welcomed a new child, retired, bought or sold a residence, decided upon new goals. These developments can change your financial objectives. Also, it is just sensible to measure your financial progress. If you are not making progress in accumulating assets, or if you are assuming too much risk as a result of your current portfolio or financial decisions, it’s time for change.

The annual review is a “deep breath” where you can get away from daily distractions and think clearly about financial planning.

Just imagine. Imagine letting your investments go for five or ten years, assuming that they’re doing okay while you wonder what the quarterly statements mean. Imagine being a few years from retirement only to find you have less than a year’s salary in savings. Imagine passing away and leaving unresolved money issues for your loved ones, or subjecting them to a contentious probate process.

These scenarios are all too real; people run to financial advisors for help with them every day. If they had only reviewed what was happening with their lives financially, they could have planned to avoid these issues in advance. Putting things off can be dangerous.

This is an ideal time to take a look under the hood – financially speaking. During your annual review, you can estimate your net worth, and also possibly learn about any tax changes that might affect your investments, business or estate. It’s also a good time to make voluntary IRA contributions, and get college funding and financial aid applications underway.

Financial planning is not an event you do once in your lifetime and forget about. Financial planning should be an ongoing priority.


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